My predictions come from my personal and business experience, as well as operating Your Business Angels through downturns and calamities other global downturns that we seemed to miss for reasons such as a mining boom and often just luck.
It has been a long time since we saw a coloured letter from the Australian Taxation office for a client. What we call a coloured letter is a computer-generated letter that could be red, blue, olive green, turquoise, brown or a threatening shade of grey. These letters point out a tax debt and have degrees of threats, cajoling, or encouragement to pay, make an agreement and risk the next coloured letter. I have not seen one since March.
Then there is the serious stuff.
These are garnishee notices, creditors statutory demands, director’s penalty notices along with even more heavy-hitting court writs and windup notices. We have not seen any of these since March either.
In terms of tax mail, we have only seen balances and some tax refunds. Not even a slightly cross letter.
Every workday, I receive the insolvency notices for Australia. This morning there were no windup notices (where a creditor has started proceedings to wind up a company that owes them money) and only nine companies that have entered creditors voluntary liquidation. The numbers have been very low since March.
The Federal Governments policy is that instead of creating many billions and billions of dollars debt in the economy and then figure out how to pay it off, they have stated that they want to grow the economy – starting by maintaining it and then increasing it.
This means that having businesses, no matter how damaged by lockdowns, restrictions, border closings and a massive reduction in consumer and business activity still operating in the economy and collectively adding value.
With our finger on the pulse, we also see that there has been little in the way of businesses chasing debt from other businesses. For us, a key indicator to watch is how much the large suppliers to the trades are pursuing debt through the courts. The usual chase from the large plumber and electrical and building suppliers seem to be absent from the insolvency reports. These large businesses have also put their pursuit on hold – and probably their ability to collect debtor’s insurance as well.
Our clients are reporting to us that there is cash flow. While some “builders are a bit slow” overall through the pandemic our clients have been getting paid, a good thing, and then again there has been the funds from the Federal and State Governments stimulus package that has made the difference.
The businesses that have real difficulties now are those that have a commercial lease and have struggled with their landlords. We have seen the best and the worst in people as agreements with tenants and landlords have evolved through this time.
All of what has happened has put Australia in Recession.
A recession is two quarters with negative results. By the second quarter (July to September) the economy went backwards by 7 per cent. That is the worst fall on record and a slightly more significant contraction than most economists had forecast.
The numbers also show people tightening the purse strings, with households saving nearly 20 per cent of their disposable income, compared to 6 per cent in the first quarter.
COVID-19 subsidies provided by the Government to businesses reached $52 billion in the quarter, with $31 billion of that coming from JobKeeper. JobKeeper accounted for nearly half of all compensation paid to employees in the arts and recreation, and accommodation and food services industries.
And for the first time since 1959, workers took home less than half of the national income.
The end of lockdowns (we genuinely hope) and the opening up of the economy and the end of the stimulus package, does not mean that the restart button has been hit. We return to “what it was like” what it means that after the Federal Budget and State budgets splash with cash, there will be a reconciliation of the economy. Those who have suffered the most in business can look forward to further punishment as the pressure comes back.
The Australian Taxation Office will put its toe in the water with collections, suppliers will want to be paid, and all of this will occur while the economy is recovering.
So, let me get to the two dates and why they are essential for you.
Just before I do that, I would say that if you are hurting with your tax debt and think it’s going to be too hard to pay, if not impossible you need to be talking to your client coordinator so we can work a strategy for you. Finding the right strategy that keeps you going and in business has never been easier.
So, these dates
March 2021
We will be over Christmas. The annual shut down of the building industry may or may not have taken place, but the real effects of the recession and downturn will be kicking in.
The money will be getting tight for SME’s and households. The glorious rush back to bunnings, the dentist and the cafes will be abating. This is where we will feel the real effect of the recession and downturn.
By this date, you should have tight credit policies in place, where needed a marketing program that talks to your regular clients and keeps them in place, and keeps your business travelling well. Your home and business budgets should be in place in case there is a real crunch.
Contrary to this, it’s about the time where a lot of infrastructure plans will be getting into place. “Shovels in the ground” as it were and if your business is in the trades you should be ready to find opportunities and make the most of what is coming. You may not get a contract, or more likely a subcontract (contracts will go to large corporations with the appropriate union involvement) but get opportunities in the vacuum that this infrastructure will create – think tradie shortage during the mining infrastructure and development boom.
Our friends at the ATO will test the waters beginning with the coloured letters and other activity.
Your Business Angels are looking at this date and want to help you with the following
By March 2021, you need to know that the real problems in the economy will become apparent. We want our clients to have done everything that relates to survival and implemented strategic and tactical processes that large and small will help you have a strong business. That you can “override” what may be very painful for many.
March 2022
Gloves off.
No forgiveness.
Here they come.
The Australian Taxation Office and trade creditors, your financiers, and landlords.
March 2022 is a year after the stimulus has ended, and the back to normal will be the back to compliance. There will be a “wink and a nod” between Federal Treasury and the Finance Department (in charge of the ATO) about collecting money or ending non-compliant businesses.
Finance companies that had been understanding over this period, landlords that had continued to be “soft” on their approach will all want to be paid. Large trade and other creditors will have started to be robust in collections.
Your Business Angels are looking at this date and want to help you with the following
The one big thing about this period and the stimulus package is that our clients got closer to us as we all worked through this time. Many of our clients have a better understanding of finance and their businesses. Many have new ambitions and goals, and we will support those.
This was a period where “the Angels” engaged more closely than ever with our clients. We want to continue this, it is not just GST and tax returns, but helping you have all that you can in your business.
